Question 1

The current year-end balance sheet data for a company are shown below. Calculate the company's:
(a) working capital.
(b) current ratio.
(c) acid-test ratio.

Accepted Answer

The answer of The current year-end balance sheet data for...

Question 2

Internal users of financial information:

Accepted Answer

A)   Are not directly involved in operating a company.
B)   Are those individuals involved in managing and operating the company.
C)   Include shareholders and lenders.
D)   Include directors and customers.
E)   Include suppliers, regulators, and the press.F) C) and D)
G) A) and D)

Question 3

Financial analysis only refers to the communication of relevant financial information to decision makers.

Accepted Answer

A) True 
 B)False

Question 4

What is the purpose of a good financial statement analysis report? What are the key components?

Accepted Answer

A good financial statement analysis repo...

Question 5

Comparative calendar-year financial data for a company are shown below. Calculate the following ratios for the company for 2012:
(a) accounts receivable turnover
(b) day's sales uncollected
(c) inventory turnover
(d) days' sales in inventory

Accepted Answer

The answer of Comparative calendar-year financial data for a company...

Question 6

Vertical analysis is a tool to evaluate individual financial statement items or groups of items in terms of a specific base amount.

Accepted Answer

A) True 
 B)False

Question 7

To compute trend percents the analyst should:

Accepted Answer

A)   Select a base period, assign each item in the base period statement a weight of 100%, and then express financial numbers from other periods as a percent of their base period number.
B)   Subtract the analysis period number from the base period number.
C)   Subtract the base period amount from the analysis period amount, divide the result by the analysis period amount, then multiply that amount by 100.
D)   Compare amounts across industries using Dun and Bradstreet.
E)   All of these.F) A) and B)
G) B) and C)

Question 8

Use the financial data shown below to calculate the following ratios for the current year:
(a) Current ratio.
(b) Acid-test ratio.
(c) Accounts receivable turnover.
(d) Days' sales uncollected.
(e) Inventory turnover.
(f) Days' sales in inventory.

Accepted Answer

The answer of Use the financial data shown below to...

Question 9

Common-size statements:

Accepted Answer

A)   Reveal changes in the relative importance of each financial statement item.
B)   Do not emphasize the relative importance of each item.
C)   Compare financial statements over time.
D)   Show the dollar amount of change for financial statement items.
E)   Reveal patterns in data across successive periods.F) B) and C)
G) C) and E)

Question 10

The comparative income statements for Golden Company are shown below. Calculate the following ratios for 2012:
(a) profit margin.
(b) gross margin.
(c) times interest earned.

Accepted Answer

The answer of The comparative income statements for Golden Company...

Question 11

A financial statement analysis report usually includes:

Accepted Answer

A)   An executive summary.
B)   An analysis overview.
C)   Evidential matter.
D)   Assumptions.
E)   All of these.F) A) and E)
G) A) and D)

Question 12

All of the following statements regarding a business segment are True except:

Accepted Answer

A)   A business segment is a part of a company's operations that serves a particular product line.
B)   A segment has assets, liabilities, and financial results of operations that can be distinguished from those of other parts of the company.
C)   A company's gain or loss from selling or closing down a segment is reported separately.
D)   A segment's income for the period prior to the disposal and the gain or loss resulting from disposing of the segment's assets are combined and reported.
E)   A segment's income for the period prior to the disposal and the gain or loss resulting from disposing of the segment's assets are reported separately.F) A) and E)
G) A) and D)

Question 13

Net income divided by net sales is the:

Accepted Answer

A)   Return on total assets.
B)   Profit margin.
C)   Current ratio.
D)   Total asset turnover.
E)   Days' sales in inventory.F) D) and E)
G) A) and B)

Question 14

One purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency and effectiveness in providing products and services.

Accepted Answer

A) True 
 B)False

Question 15

The background on a company, its industry, and its economic setting is usually included in which of the following sections of a financial statement analysis report?

Accepted Answer

A)   Executive summary.
B)   Analysis overview.
C)   Evidential conclusions.
D)   Factor analysis.
E)   Inferences.F) A) and D)
G) A) and E)

Question 16

In horizontal analysis the percent change is computed by:

Accepted Answer

A)   Subtracting the analysis period amount from the base period amount.
B)   Subtracting the base period amount from the analysis period amount.
C)   Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100.
D)   Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100.
E)   Subtracting the base period amount from the analysis amount, then dividing the result by the analysis period amount.F) A) and B)
G) A) and C)

Question 17

The greater the times interest earned ratio, the greater the risk a company is exposed to.

Accepted Answer

A) True 
 B)False

Question 18

A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year. At year-end, the price per share of the company's stock was $49.40. What is the company's year-end price-earnings ratio?

Accepted Answer

The answer of A company reported net income of $78,000...

Question 19

The return on total assets can be calculated as profit margin times total asset turnover.

Accepted Answer

A) True 
 B)False

Question 20

A rough guideline states that for a company with no discounts offered, days' sales uncollected should not exceed 1 1/3 times the days in its credit period.

Accepted Answer

A) True 
 B)False

Exam 17: Analysis of Financial Statements

The greater the times interest earned ratio, the greater the risk a company is exposed to.

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A rough guideline states that for a company with no discounts offered, days' sales uncollected should not exceed 1 1/3 times the days in its credit period.

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Common-size statements:

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The current year-end balance sheet data for a company are shown below. Calculate the company's: (a) working capital. (b) current ratio. (c) acid-test ratio.

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Comparative calendar-year financial data for a company are shown below. Calculate the following ratios for the company for 2012: (a) accounts receivable turnover (b) day's sales uncollected (c) inventory turnover (d) days' sales in inventory

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To compute trend percents the analyst should:

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What is the purpose of a good financial statement analysis report? What are the key components?

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The comparative income statements for Golden Company are shown below. Calculate the following ratios for 2012: (a) profit margin. (b) gross margin. (c) times interest earned.

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The return on total assets can be calculated as profit margin times total asset turnover.

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All of the following statements regarding a business segment are True except:

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A financial statement analysis report usually includes:

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Vertical analysis is a tool to evaluate individual financial statement items or groups of items in terms of a specific base amount.

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Financial analysis only refers to the communication of relevant financial information to decision makers.

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The background on a company, its industry, and its economic setting is usually included in which of the following sections of a financial statement analysis report?

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Internal users of financial information:

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A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year. At year-end, the price per share of the company's stock was $49.40. What is the company's year-end price-earnings ratio?

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One purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency and effectiveness in providing products and services.

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Use the financial data shown below to calculate the following ratios for the current year: (a) Current ratio. (b) Acid-test ratio. (c) Accounts receivable turnover. (d) Days' sales uncollected. (e) Inventory turnover. (f) Days' sales in inventory.

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Net income divided by net sales is the:

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In horizontal analysis the percent change is computed by:

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A good financial statement analysis repo...
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